20.16 Costs of quality analysis, non-financial quality measures
. (20 min)
1 and 2
2012
2011
Sales €12,500,000
€10,000,000
Costs of quality
Cost
(1)
Percentage
of sales
(2) = (1) ÷
€12,500,000
Cost
(3)
Percentage
of sales
(4) = (3) ÷
€10,000,000
Prevention costs
Design engineering
Preventive maintenance
Training
Supplier evaluations Total prevention costs Appraisal costs
Line inspection
Product-testing equipment Incoming materials inspection
Product-testing labour Total appraisal costs Internal failure costs
Scrap
Rework
Breakdown maintenance Total internal failure costs External failure costs
Returned goods
Customer support Product liability claims
Warranty repair Total external failure costs Total costs of quality
€240,000 90,000 120,000 50,000 500,000
85,000 50,000 40,000 75,000 250,000
175,000 135,000 40,000 350,000
145,000 30,000 100,000 200,000 475,000
€1,575,000
4.0%
2.0%
2.8%
3.8%
12.6%
€100,000 35,000 45,000 20,000 200,000
110,000 50,000 20,000 220,000 400,000
250,000 160,000 90,000 500,000
60,000 40,000 200,000 300,000 600,000
€1,700,000
2.0%
4.0%
5.0%
6.0%
17.0% Between 2011 and 2012, Alcazarquivir’s costs of quality have declined from 17% of sales to 12.6% . The analysis of individual costs of quality categories indicates that
Alcazarquivir began allocating more resources to prevention activities – design engineering, preventive maintenance, training and supplier evaluations in 2012 relative to 2011. As a result, appraisal costs declined from 4% of sales to 2%, costs of internal failure fell from 5% of sales to 2.8% and external failure costs decreased from 6% of sales to 3.8%.
Bhimani, Horngren, Datar and Rajan, Management and Cost Accounting, 5 th Edition, Instructor’s Manual © Pearson Education Limited 2012 3 Examples of non-financial quality measures that Alcazarquivir could monitor are a Number of defective grinders shipped to customers as a percentage of total units of grinders shipped. b Ratio of good output to total output at each production process. c Employee turnover. Share with your friends: |
